Weekly Market Commentary

Jun 24, 2019

Market Recap Week ending 6/21/2019

-Darren Leavitt, CFA

US equity markets continued to rally last week and hit record highs on dovish tones echoed from several central banks and on constructive headlines around the upcoming meeting with President Trump and President Xi at the G20 summit. Separately, increased tensions between the US and Iran whipsawed markets after Iran shot down a US unmanned drone. For the week the S&P increased by 2.2%, the Dow gained 2.4%, the NASDAQ was up 3.0%, and the Russell 2000 finished 1.8% higher. US Treasuries continued to bid as well. The 2-year note shed six basis points to close with a yield of 1.78% while the 10-year bond lost one basis point to close with a yield of 2.07. Gold and Oil had nice gains last week. Gold was up over $50 to close just under $1400 an Oz. Oil rallied on the increased tensions in the Middle East and gained over 9% to $57.33 a barrel. There were no changes to our models last week.

ECB President, Mario Draghi jump-started the week with comments that indicated the ECB would provide additional stimulus if conditions in the Eurozone do not improve. The US, Japan, and England had central bank meetings in the week, and all seemed to suggest a more dovish stance. The lack of inflation across the globe was a central theme. In the US, the Fed dropped the word “patient” from its most recent policy statement and indicated that the Fed was poised to act as appropriate to sustain economic expansion. Fed funds futures now assign a 100% probability to a 25 basis point cut in July.

Investors were pleased to hear that President Trump and President Xi will extend the duration of their meeting at the G20. Additionally, both sides indicated that trade would be discussed between the leaders and in fact said that trade delegates from both sides would start talks before the G20.

Iran shot down an unmanned drone that they claim breached their air space. The incident induced volatile trade and put a nice bid into oil. The US was close to launching a military response but for the time being, has held back and instead called for more sanctions on Iran.

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